UPMC operating revenue up 20% to $19B in 2018 as it preps for legal bout
- UPMC's operating revenue grew by 20% to nearly $19 billion in 2018, up from $15.6 billion the previous year. The nonprofit health system's operating margin slid to 0.9% in 2018, down from 1.6% in 2017.
- Operating income was $166 million, down from $246 million in 2017, according to consolidated financial results released Thursday. The decline was due to one-time settlements with third-party payers, TribLive reports.
- Payer rate increases and hospital affiliations pushed health service revenue up $1.9 billion to $11.9 billion. Insurance-related revenue climbed $1.4 billion to $9 billion for the year, fueled by 140,000 new insurance members.
The report is a spot of good news as UPMC kicked off 2019 with legal pressures stemming from a contract dispute with rival health system Highmark.
Pennsylvania Attorney General Josh Shapiro petitioned a state court Feb. 7 to intervene in the battle, accusing UPMC of not fulfilling its charitable mission as a nonprofit by refusing to agree to a new contract between the two organizations. UPMC countersued the attorney general on Feb. 21, calling the attorney general's claims frivolous. He responded that his office would not back down.
During 2018, outpatient revenue grew 25%, admissions increased 15% and physician revenue rose 13%.
Earnings before interest, depreciation and amortization inched up slightly to $790 million, from $789 million in 2017.
Capital expenditures and business investments for the year totaled $905 million. Of that, more than $170 million went for technology-enabled operating initiatives and critical infrastructure. "That included a more flexible data center, expansion of telemedicine capabilities, and installation of biometric fingerprint scanners to identify patients while speeding check-ins, preventing identity theft and offering greater customer convenience," UPMC said.
The system finished the year with $6.9 billion in cash and investments.
In addition to scrutiny around their tax-exempt status, nonprofit hospitals continue to face headwinds from shrinking volumes and reimbursement cuts. S&P Global forecasts a stable year for the sector, but cites major risks such as Medicaid changes, intrusion of nontraditional competitors and the possibility of a recession.
Other nonprofit systems have reported a similar trend recently of revenue increases but lowered operating income.
Mayo Clinic tallied $12.6 billion in revenue in 2018, up 5.1% from $11.09 billion the prior year. Net operating income was basically flat at $706 million versus $707 million in 2017. The results came despite a $1 billion investment to implement a systemwide Epic EHR and $50 million in revenue lost during the transition.
Earlier this week, Cleveland Clinic reported revenue reaching nearly $9 billion as the system added facilities and treated a record number of patients.
Ascension, the country's largest nonprofit hospital operator, reaped $6.4 billion in revenue for the three months ended Dec. 31, up from $5.6 billion in same period in 2017. Income from operations was $185.4 million, compared with $73.2 million the prior year. The system recently announced restructuring plans, including elimination of three executive jobs and dissolving the divide between its healthcare and solutions divisions.